That particular price skirmish started a couple months ago - before the anti-trust settlement (which didn't even include the UK). It's a very limited price fight between Sony and Amazon, not a sign of things to come.

I haven't understood the price war idea from the beginning. Most people are not format shifters, so they buy a Kindle and buy their ebooks from Amazon or they buy a Nook and buy their ebooks from B&N. It seems to me that the real price war should be on the hardware, not on the ebooks.

Yes, there is a percentage of buyers who will strip DRM and format shift, but I suspect that once you get outside Mobile Read (and perhaps even within MR), the group of strippers and shifters is really small in comparison to the whole group of ebook buyers. Consequently, while B&N might need to war with Apple, Sony, Kobo, and other etailers of ePub format ebooks, there is little reason for Amazon to war with B&N, Apple, etc. as regards ebooks themselves. I'm surprised there isn't more price warring going on with the hardware, which is the gateway.

Yes, there is a percentage of buyers who will strip DRM and format shift, but I suspect that once you get outside Mobile Read (and perhaps even within MR), the group of strippers and shifters is really small in comparison to the whole group of ebook buyers. Consequently, while B&N might need to war with Apple, Sony, Kobo, and other etailers of ePub format ebooks, there is little reason for Amazon to war with B&N, Apple, etc. as regards ebooks themselves. I'm surprised there isn't more price warring going on with the hardware, which is the gateway.

If you look at the number of downloads for Alf's tools at the primary site the numbers rarely go above 5 digits. So the reality is the vast majority of folks are comfortable within the walled gardens.

And yes, the real ebook price competition is "within" the commercial formats not between them.

But hardware-level competition isn't much of an issue because all the players draw from the same component pool and the same chinese manufacturers. The only real differences, cost-wise, are in the software and DRM, and in the economies of scale; all of which (strongly) favor Amazon in the dedicated reader space and Apple in the Tablet and phone space. (With Amazon looking to creep up in the tablet space.) As the Five Hour Price war proved, Amazon is not going to let any significant competitor undercut them on hardware prices to any meaningful extent and since their volumes are higher and costs are lower it would take very deep pockets and a lot of bleeding to mount any sustained attack on Kindle pricing. Which is why Amazon's strategy is to price their readers comparably to the competition (slightly lower with the Ads, slightly higher without them) so that their hardware margins are always just a wee bit better than the competition.

The reality is that until a whole new generation of low-cost display *technology* emerges to change the economic of the business, Amazon is sitting pretty and the best any challenger can hope for is to keep pace with them. Taking significant share on pure merit (as opposed to political action or other market distortions) is pretty much out of the question for the next few years.

But are you more likely to buy Amazon (or whoever) hardware knowing that you'll always get the best price on the books?

It's not the hardware, it's the apps.

While there are some of us that like eInk, which tend to be dedicated readers, many are hacking them to use android.

And with Android comes a variety of apps, including the Kindle, Kobo, Sony and Nook apps, along with all the other ebook readers that read DRM'less stuff.

So add the people who hack the eInk machines, and then figure in those who read off of tablets. And those owners want a good app selection, which includes reader apps as well.

When ever you've got a choice of stores, you've got competition in the background. The only really locked in book store I can think of right off is Apple's. AFAIK, their iBook app is only available on their own hardware. And even though I had an Iphone, and still have an Ipad, I have only bought one book from their store. So, for me, they put themselves out of the market because I don't want to have to buy an Apple product to read my books, and they don't seem to be willing to let others carry their app.

But I still see plenty of room for competition out there, as long as the store app covers a lot of ground.

With price-fixing that is guaranteed, no?
That is just one of the ways Price Fixing helps Amazon.

I'm not talking about price-fixing, I'm talking about the price war.

Amazon pretty much built the ebook market by having the cheapest books. Even competing against their own paper book division. They promise to always have the cheapest books by price-matching. Which gives us a price war if anyone tries to undercut them.